m What is IA??

m Where one party in a transaction has more or

superior information compared to the other
party. This creates an imbalance of power in
transactions between the parties which can
sometimes cause the transactions to get
skewed.
m This often happens in transactions where the
seller knows more than the buyer, although the
reverse can happen as well. Potentially, this
could be a harmful situation because one party
can take advantage of the other party͛s lack of
knowledge.
m Proper regulations should be in place to be effective -
Even though Enron had a 64 page Ethical code of
conduct they did not keep to this code and hence the
scandal. Also government regulations should be in
place to deter these offenders from cooking the
accounts and insider trading deals.

m Auditors should not be influenced by the company

which they are auditing ʹ The Enron case led to stricter
guidelines for auditors through the Sarbanes-Oxley law
passed in 2002.
Q7- Role of Audit & Accountants in a
PLC ?

m ïhanging Accountant͛s role:

m Traditional role - Timely and up-to-date recording of
relevant financial and non-financial information
enabling rational economic decision making .
m ïontemporary role
m key person in strategic business decision making,
m Ensure compliance and no room for fraud
m ïhanging Auditor͛s role:
m Financial audit, Risk Audit, Operational audit, System
audit, etc͙͙͙͙͙..
Q7- Role of Audit & Accountants in a PLC?
Contd...
m ëow did Arthur Anderson ( Enron͛s Auditor)
perform in their duty to the shareholders of Enron ?
m Andersen failed its obligation of making sufficient
awareness to the Board , the concerns about Enron͛s
internal contracts over the related-party transactions.
m Why? May be did not want to lose lucrative audit fee
received from Enron
m In 2000, Arthur Andersen earned $25 million in audit fees and
$27 million in consulting fees (this amount accounted for
roughly 27% of the audit fees of public clients for Arthur
Andersen's ëouston office).
m Local exp: NTB Plc
m FX losses due to lack of sound market risk management controls and internal
audit lapses?
 Q8 - How to develop a successful
corporate ethics culture in an
organisation?
m Ensure Board Level support and commitment
ÿ May be Difficult: Biggest ïrooks are at the Top
m Appoint a Steering ïommittee consisting
ÿ Independent Directors
ÿ Subject Experts
ÿ ïonsultants
ÿ Senior Managers
m Appoint an Implementation Team consisting
ÿ Subject Experts, Senior Managers and Middle
Managers
Q8 - How to develop a successful corporate
ethics culture in an organisation?
Contd...
[ Develop Policy and Standards Operating
Procedures
[ Benchmarking best practices ͞Think Global: Act Local͟
[ Include periodic reviews and reinforcement
methodology
[ Train and Build awareness
[ ëow and Why these policies
[ ëighlight the business benefits
[ Train and retrain for required competencies
[ Train review teams
Q8 - How to develop a successful
corporate ethics culture in an
organisation? Contd...
[ Install a Monitoring mechanism
[ By top management
[ By cross functional teams
[ Through routine and ad-hoc inspections
[ Back up
[ By clearly stated consequences
[ in the case of disobedience.
[ For non-compliance due to negligence
[ ïommunicate to employees on major non-
compliances
[ Initiate a learning process for continuous
improvement.
Q9- 05 things which can encourage
ethical corporate behaviour ?
How can this behaviour be sustained ?
å. Ensure top team commitment
2. Periodic reviews for violations
3. Assign responsibility & accountability and take
appropriate actions for violations
4. Increase the level of awareness among
management : E.g.: via training
5. Establish and practice processes of
ÿ Record Keeping,
ÿ Reporting and
ÿ Whistle-blowing
Q10 -Other examples of corporate
collapses?

 2åST July 2002, File for ïhapter åå bankruptcy

Worldïom protection

 A regulatory failure ʹ as per Yashwant Sinha (

Satyam ïomputers for union finance minister- The Financial
Express, 2åst Nov, 2009)

 Irresponsible risk management

Pramuka Bank

 Lack of Regulatory supervision

Golden Key  Is the business model socially responsible?
Q10 -Other examples of corporate
collapses?
m M

 
M
 
M 

m M



!



m " M"# "# """

#  $